US states slash fuel taxes after spike in prices

California is considering a proposal to give residents a refund of $400 per vehicle in response to record-high fuel prices, while Maryland and Georgia last week temporarily suspended state taxes on fuel purchased in those states.

California governor Gavin Newsom (D) today unveiled more details on a proposed $11bn fuel price relief package, which would need support from the state's Democratic-controlled legislature to be signed into law. Out of the plan, $9bn would go to residents in debit cards with $400 for each registered vehicle, up to two vehicles, with payments starting as soon as July.

"That direct relief will address the issue that we all are struggling to address, and that is the issue of gas prices," Newsom said.

Governors across the US have started tapping surplus state funds to provide drivers relief from gasoline prices that for regular grade hit a record national weekly high of $4.32/USG earlier this month, according to data from the US Energy Information Administration (EIA). Fuel prices have surged in response to the Russia-Ukraine conflict and corresponding sanctions.

Maryland governor Larry Hogan (R) signed emergency legislation on 18 March that will suspend for 30 days the state's 36.1¢/USG tax on gasoline and 36.9¢/USG tax on diesel. Georgia governor Brian Kemp (R) the same day suspended his state's 29.1¢/USG tax on gasoline and 32.6¢/USG tax on diesel through 31 May.

For the California relief package, it would include up to $600mn to pause part of the state's sales taxes on diesel for a year and $523mn to pause inflationary increases to state taxes on gasoline and diesel. It would also have $750mn in grants for public transit agencies to offer three months of free public transit. Californians paid $5.71/USG for regular grade gasoline in the week ending 21 March, according to EIA data

Some Democratic lawmakers in the US Congress have proposed suspending the federal 18.4¢/USG tax on gasoline for the rest of the year. But critics say lifting fuel taxes will eat into needed funding for road work and stimulate the economy at a time when inflation is already at 40-year highs. Much of the benefits of a fuel tax holiday will flow to oil producers in the form of higher prices from higher demand, non-profit group Committee for a Responsible Federal Budget president Maya MacGuineas said last month.

By Chris Knight